On February 28, the US and Israel launched a major joint military attack on Iran, and the conflict is still widening. Saab has no direct exposure to the region, but accelerating European procurement decisions and increased demand for its products could add a few percentage points to near-term revenue expectations. However, as of this comment, we keep our estimates unchanged for Saab.

New War Increases Uncertainty

With the US now fighting in the Middle East while also supporting Ukraine in Eastern Europe, allied military installations are being targeted by Iranian missile strikes. That combination strengthens the case for European countries to accelerate stockpiling of key military equipment and to scale their own defense industrial capacity. The degree of urgency still depends on Russia sustaining pressure on Europe’s eastern flank. The exposure of allied infrastructure is a reminder that collective defense is a practical necessity. Europe cannot assume others will carry the burden.

European Nations Likely Pushed Into Faster Military Build-up

This conflict did not come as a complete surprise, given the significant military buildup in the region over recent weeks. Saab has no direct revenue exposure in Iran or the Gulf. What matters is the broader strategic picture. With the US now committing substantial military resources to a new front line in the Middle East, European governments face increasing pressure to stand more firmly on their own feet on Europe's eastern flank. We think this urgency raises the odds for European defense spending to get allocated faster than current expectations suggest. If the war drags on, that could translate into even stronger demand for Saab’s products and platforms.

In that case, we believe that even a modest acceleration in orders across a few of Saab's active sales campaigns could add low-to-mid single-digit percentage upside to revenue expectations for 2026 and 2027. Moreover, if such incremental demand were heavily tilted toward higher-margin products with shorter production cycles, the profit impact in the short- to medium-term could be notable.

Too Early to Revise Estimates

The conflict is only ~60 hours old and outcomes remain highly uncertain, so we keep our estimates unchanged. To revise our numbers, we would first need evidence that the situation is translating into higher demand, such as accelerated procurement announcements, order intake materially above our assumptions, or an upgrade to Saab’s guidance.

In the near-term, defense stocks can still be supported by sentiment as investors price in a higher and more durable spending path, even before profits move. For Saab, the backdrop remains supportive given its record backlog and raised growth targets through 2027. However, any fundamental impact still needs to show up in orders, deliveries, and margins. Since we see no immediate change in Saab's fundamentals, we continue to view the current valuation as unsustainably high. Investors will now assess what a second active US military conflict implies for global defense spending.